By Michael Ha

ACE Ltd. said an ongoing internal probe into its sale of finitereinsurance has not uncovered any major misconduct, and the companycontinues to offer such products despite heightened regulatoryscrutiny.

ACE Chief Executive Officer Evan Greenberg said the internalprobe into use of finite re products should be completed in about amonth.

“To date what we are seeing is that [finite re] transactionsgenerally were structured in a way intended to provide appropriaterisk transfers and were accounted for properly,” he said. “We arelooking at all of the documentations, including all e-mailcorrespondence, etc. that might surround any of thesetransactions.”

ACE will continue to discuss these matters with variousregulators whose investigations are ongoing, he noted during ananalyst conference call to discuss ACE's 2005 first-quarterresults.

Mr. Greenberg also defended ACE's sale of finite products, whichhave drawn attention because, when not structured to properlytransfer risk, they are in violation of accounting rules and canprovide an improper picture of company finances.

“We are still writing finite. It continues to generate incomeand revenue, but it's very slow, as you can imagine,” he said. “Wecontinue to believe these products will have an appropriate placein managing risks.”

The Bermuda-based ACE posted $433 million in net income, down 3percent from a year ago, but the insurer said it reached a newrecord level on an operating-income basis, which excludes netrealized gains and losses. First-quarter operating income was $441million–up 7.3 percent.

Overall underwriting income for the quarter fell 7.5 percent to$311 million. The combined ratio was still a stellar 89.2, thoughdeteriorating slightly from 88.4. The results also included some$30 million of investigation-related expenses.

Net written premiums came in at $3.365 billion, increasing 4percent, but the insurer observed that growth has been slowing inline with softening prices.

“Our North American operations experienced good growth in thequarter, primarily driven by our risk management, crop insurance,workers' comp, medical malpractice and international riskbusinesses,” Mr. Greenberg said. Most other classes,however–particularly excess casualty, directors and officerscoverage, and property–were flat to down, he said.

“Earned premium growth was strong while net premium growthslowed in line with market conditions. The market continues tosoften,” Mr. Greenberg told analysts. “Premium revenues in a numberof our businesses were flat to down. We simply refuse to chaseunderpriced business.”

Brian Meredith, insurance analyst at Banc of America Securities,said ACE operating results were in line with his estimate. Heobserved that while ACE's underwriting margins remained strong,top-line growth fell below expectations.

“Competition is continuing and new business growth ischallenging,” he said.

“Premium revenues in a number of our businesses were flat todown. We simply refuse to chase underpriced business.”

Evan Greenberg, CEO, ACE Ltd.